A little more on the debt debate

Gene has posts: here he reminds people that as of yet time travel is not possible and future generations did not vote on (much less plan for) the public debt they deal with. That, like taxes, is the price of modern civilization. It's something we're stuck with - we don't properly plan for it. And here he points out once again that a good indicator of whether Bob Murphy is miscommunicating Krugman's position is that he is making a claim about Krugman's position (I kid Bob... I like Bob).

But I am not done with Bob yet.

In this comment he seems to think I am marveling over the fact that whether or not g > r has practical implications for debt burdens.

Umm... no. Let's be clear: the implicit assumption of everybody so far has been to abstract away from those sort of sustainability issues. If you really think that's where we're at I have to seriously question how much progress we've made in this discussion.

What Grant helpfully points out is that Bob's models (as far as I can tell) don't really tell us about the inherent costs of debt so much as they tell us that debt imposes the same sorts of costs on the future that taxation imposes on the present.

Well duh.

But there's nothing costly about debt that isn't also costly about taxation. And that's Grant's contribution that brings some of this back to reality. The only reason why Bob's model imposes costs on future cohorts (not future national income, of course) is because he retires all the debt. In other words, debt has the same costs and benefits that taxation has just on a different group of people: namely, it has costs associated with distribution and incentives.

Which is Krugman's original different "kettle of fish". There's nothing uniquely costly or bad about debt.

And to bring this back to Krugman and Baker's real public service announcement: it makes no sense to think about public debt the way you think about your family's debt. Talk about the country having to tighten its belt the way grandpa did during the Depression is nonsense. It's good personal finance (what else can you do?), but bad public finance.